The U.S. solar market is shaping up to be larger than anticipated and could end up installing nearly 3.3 GW of solar panels in 2012, a roughly 18 percent jump from the previous forecast of 2.8 GW, according to a report released Wednesday.

The U.S. solar market is shaping up to be significantly larger than anticipated and could end up installing nearly 3.3 GW of solar panels in 2012, a roughly 18 percent jump from the previous forecast of 2.8 GW, according to a report from GTM Research and Solar Energy Industries Association on Wednesday. If the prediction pans out, the U.S. solar panel market will have seen a 75 percent growth from 2011.

The first quarter of this year saw 506 MW of solar panels installed in the country, an 85 percent jump from the same quarter in 2011, according to the report. New Jersey was the biggest market during this period with 174 MW of newly completed projects.

There’s a couple reasons contributing to this jump in the industry. Many solar power plants are being built at a fast pace so that they can be completed by the end of this year and qualify for a federal subsidy program. In addition the market for installing solar panels on commercial buildings has been surprisingly strong in California and New Jersey, said Shayle Kann, vice president at GTM.

In utility PG&E’s territory, the electric rates are high enough for heavy power users that some solar projects are worthwhile investments. That’s despite that California’s incentives for commercial installations have declined significantly (a result of a gradual, scheduled drop to correspond with the increasing demand), Kann said.

The commercial sector in California may see even stronger growth yet. Starting in November this year, small and medium businesses served by PG&E will be put on rate plans in which they will have to pay higher rates if they use electricity during hours of peak demand. The same classes of customers in Southern California Edison’s territory could begin doing the same in October this year while San Diego Gas & Electric is looking at a March 2013 startup time, the California Public Utilities Commission said Tuesday. Throughout the state, many large commercial, industrial and agricultural customers already are enrolled in such time-of-use plans.

Low cost solar

The solar industry has also seen a drop in solar panel prices – at about 50 percent worldwide during 2011 – and that has helped to lower project costs. But increasingly, the solar panels themselves are accounting for a smaller percentage of the overall project development and construction expenses. For some companies that install small, residential and commercial systems, the costs such as marketing and filling out permits and other paperwork are much more burdensome. Efforts to reduce these so-called “soft costs,” because they are not related to hardware, are among the main goals of the U.S. Department of Energy, some state and local authorities and, of course, solar companies.

Still, a looming trade case against imported Chinese silicon solar cells could affect market demand. The U.S. Department of Commerce in recent months approved preliminary tariffs on those solar cells, and it plans to finalize those decisions later this year. Major Chinese solar cell makers plan to circumvent the tariffs by using cells made in factories out of China, whether those factories are their own or someone else’s.

Using factories outside of China will raise their product costs, but not nearly as much as what they would otherwise have to include in pricing their products. But their cost projections, like the commerce department decisions, are preliminary, and they could face higher or lower tariffs when the final decisions comes. How well they can minimize supply interruptions to their customers will be important.

The U.S. solar manufacturing sector continues to face tough competition worldwide, and how much the tariffs will help them to compete remains a big question. During the first quarter of this year, 160 MW of solar panels were made in the United States, compared with 335 MW in the year-ago period, GTM said. Several U.S. manufacturers have filed for bankruptcy over the past year, including Energy Conversion Devices, SpectraWatt, Evergreen Solar and Solyndra. Worldwide, many more manufactures have gone out of business during the same period.